Asia (Other)

Screen Shot 2018-12-14 at 5.44.36 PMDeveloping a deep understanding of the local market means investors can advance with greater confidence and fewer surprises.


Infrastructure projects in emerging markets attract investors on the back of potential returns that can outstrip yields in mature markets. But with opportunity comes risk, particularly in the construction, engineering and infrastructure sector, which saw the largest year-over-year increases in fraud incidents (up seven percentage points to 83 percent), according to our data collected in the Global Fraud & Risk Report 2017/2018.

In this article, we explore the steps that investors can take to help identify and mitigate infrastructure investment risks in Sub-Saharan Africa and South Asia.

Delivering infrastructure projects in Sub-Saharan Africa
Successful infrastructure investment requires the integration of projects into the host jurisdiction’s existing network of transport, power generation and distribution grids. This is not just an engineering challenge. It requires institutional capacity and a functioning legal and regulatory framework to accommodate large-scale, long-term investments.

Many Sub-Saharan Africa jurisdictions lack the planning capacity and resources to link existing infrastructure to new projects. Additionally, many new projects in this region tend to be politically significant and thus potentially vulnerable to non-transparent interference or influence. Unrealistic expectations about what the project can deliver can also undermine the investment’s commercial viability. For example, if investors in rail freight projects are expected to accommodate passenger transport, the economics of an investment can be distorted.

While investors should be aware of such red flags, they cannot often directly influence them. Pre-investment intelligence-gathering can help investors understand the regulatory environment and the implementation capacity of key government agencies in order to better assess the feasibility of a project.

Infrastructure investment remains a challenge in South Asia
Investors in infrastructure projects in South Asia face a similar set of challenges. For example, over the past three years, private sector infrastructure investment in India has slowed down due to a combination of stretched corporate balance sheets and rising non-performing assets for banks. The pace at which project-related decisions are being approved by various government departments also remains slow.

However, investment activity is still high in certain sectors in South Asia. One such example is the renewable energy sector in India, which has seen significant interest from domestic and international investors. While growth in renewable energy remains a key goal for the government of India, the aggressive push on the agenda has resulted in a sharp decline in uptake prices, mainly for solar energy, due to the entry of many players, most of whom have limited or no experience in the sector. This puts immense pressure on local developers to deliver projects at low cost, which in turn affects the quality of material used and the sustainability of such projects. At the same time, companies still need to work with local governments and other stakeholders to ensure they obtain necessary approvals in a timely fashion, which means that the risk of corruption remains.

Investors often struggle to understand whether the costs and performance of a project reflect its true health. Given the relatively close nexus between companies, politicians and bureaucracy in India, businesses often get pushed into practices which are potentially inappropriate and that can directly impact financial reporting. The wide gap between what is reported in the books versus the actual performance of the project casts doubt on the overall integrity of the quality and financials of a project. Other South Asian markets like Bangladesh and Sri Lanka are also exposed to similar issues.

While these challenges pose a risk, the significance of the opportunity often outweighs the cost of the risk. By developing a deep understanding of all the dynamics in the local market, investors can advance with greater confidence and make investments in line with their expectations regarding returns with fewer surprises.



Reshmi Khurana, Managing Director, Head of Southeast Asia, Business Intelligence and Investigations, APAC
Tarun Bhatia, Managing Director, Head of South Asia, Business Intelligence and Investigations, APAC

Brian Weihs, Managing Director, Mexico Office Head, Business Intelligence and Investigations, LATAM
Oliver Stern, Associate Managing Director, Business Intelligence and Investigations, EMEA



Kroll is the leading global provider of risk solutions with more than 45 years of experience in helping clients make confident risk management decisions about people, assets, operations and security. For more information, visit

Screen Shot 2018-07-20 at 1.08.23 PM



Related Articles by Firm
Physical security key to data centre protection
Controls that prevent physical access to servers must be a fundamental component of any information security programme ...
Combating private sector corruption in Indonesia: A challenge to address in 2019
With elections just around the corner, corruption involving government and public service agencies will likely be a top issue ...
Defeatist data security cultures no more
Organisations need to recognise that information security is a question of risk and step up defences now ..
Innovating internal investigations in today’s hyperconnected world
Data visualisation tools have emerged as a powerful resource for internal investigations ...
Why asset searches are increasing in Singapore
Parties choose to resolve their disputes in Singapore for the relative ease of enforcement of awards and judgments.
New ultimate beneficial ownership disclosure requirements: An important step in combating financial crime in Indonesia
The requirement will strengthen and amplify the anti-corruption, anti-money laundering, anti-tax avoidance/evasion and anti-monopolism efforts.
Kroll: Opaque ownership fastest-growing concern for compliance professionals
Less than 25 percent feel highly confident in their program’s ability to address these risks.
Singapore gets serious in fight against bribery and corruption
Conducting joint investigations and joint enforcement actions with foreign authorities may become a new norm ...
Global Fraud & Risk Report – 2017/18
Forging New Paths in Times of Uncertainty ...
Law firms play a critical role in the new Indian Insolvency & Bankruptcy Code
Many new reforms and regulations have been introduced to support economic growth. However, one area that was always neglected was bankruptcy law ...
Risks for investors ahead of 2018 Malaysia elections
Investors should be aware of elevated fraud and corruption risks in the lead-up to the election ...
Forensic accounting to assist asset search
There are endless ways to identify assets, but it can be a costly exercise ...
Buyer, beware!
The final of four reports from Kroll and Liberty Asia on how to mitigate any hidden compliance and reputational risks relating to human trafficking issues …
Forewarned is forearmed
The third of four reports from Kroll and Liberty Asia on how to mitigate any hidden compliance and reputational risks relating to human trafficking issues …
Crime vs. Ethics: Changing corporate culture to reduce modern slavery
The second of four reports from Kroll and Liberty Asia on how to mitigate any hidden compliance and reputational risks relating to human trafficking issues …
Reducing and removing involvement in modern slavery
The first of four reports from Kroll and Liberty Asia on how to mitigate any hidden compliance and reputational risks relating to human trafficking issues ...
Related Articles
Reform of regulations on private issuance of corporate bonds in Vietnam
One of the most notable points under Decree 163 is that the requisite conditions for issuing corporate bonds have been significantly liberalised ...
Philippines: Protecting indigenous knowledge systems and practices in intellectual property rights registration
Indigenous peoples (IPs) and indigenous cultural communities (ICCs), though explicitly protected under the constitution itself, sadly remain one of the most marginalised and forgotten sectors in Philippine society ...
African competition law developments in 2018 and the outlook for 2019
Africa is sometimes described as the “last frontier” of competition law because many African countries have only recently adopted modern competition laws ...
Related Articles by Jurisdiction
Closing the financing gap — infrastructure project bankability
The perceived lack of bankable projects by international investors, not the lack of available capital, is the key impediment ...
Global buyers continue to look to Asia
Strong growth and a rising middle class continue to attract foreign investors to the region, though outbound activity has fallen ...
Shipping & Insurance
Turning the lens on the plight of ship owners on what can only be described as despondent times in the industry, our inaugural Shipping & Insurance issue features a cover story which carves out four of the biggest ...
Latest Articles
Deals of the Year 2018
Asian-mena Counsel’s review of the top transactions and matters that closed during 2018...
The art of deal management
Oliver Mould, head of Asia for Lawyers On Demand, speaks with Nick Tomlinson about his background, career, current role as general counsel for Asia Pacific at Dentsu Aegis Network and the importance of deal management ...